C.g. Narayan Murthy Committee Report 96na

REPORT OF THE SEBI COMMITTEE ON CORPORATE GOVERNANCE (N.NARYANMURTHY- CHAIRMAN) ( 8 Feb. 2003 ) OF REFERENCE - To review the performance of corporate governance - To review the role of companies in responding to rumours and other price sensitive information circulating in the market, in order to enhance the transparency and integrity of the market.

RECOMMENDATIONS AUDIT COMMITTES 1- Review of information by Audit Committees (Mandatory) 2- Financial Literacy of of Audit Committee (Mandatory) AUDIT REPORTS AND AUDIT QUALIFICATIONS 3- Disclosure of ing treatment (Mandatory) 4- Audit Qualifications ( Non mandatory) RELATED PARTY TRANSACTIONS 5- Basis for Related Party Transactions (Mandatory) 6- Definition of Related Party Transactions (Mandatory)

RECOMMENDATIONS RISK MANAGEMENT 7- Board disclosures (Mandatory) 8- Training of Board (Non-mandatory) PROCEEDS FROM INITIAL PUBLIC OFFERINGS (IPO) 9- Use of Proceeds (Mandatory) CODE OF CONDUCT 10- Written code for executive management (Mandatory) NOMINEE DIRECTORS 11- Exclusion of Nominee Directors from the definition of Independent directors (Mandatory)

RECOMMENDATIONS NON-EXECUTIVE DIRECTOR COMPENSATION 12- Limits on Compensation paid on Independent directors (Mandatory) INDEPENDENT DIRECTORS 13- Definition of Independent Directors WHISTLE BLOWER POLICY 14- Internal Policy on Access to Audit Committee (Mandatory) 15- Whistle Blower Policy (Mandatory)

RECOMMENDATIONS SUBSIDIARY COMPANIES 16- Audit Committee Requirements (Mandatory) REAL TIME DISCLOSURES Evaluation of Board Performance 17- Mechanism of evaluating non executive board (Non mandatory) Analyst Report 18- SEBI should make the rules on disclosures of Analyst Report (Mandatory)

RECOMMENDATIONS RECOMMENDATIONS OF NARESH CHANDRA COMMITTEE 19- Disclosure of Contingent Liabilities 20- CEO/COO Certification 21- Definition of Independent Director ( All Mandatory)

OTHER SUGGESTIONS HARMONISATION REMOVAL OF INDEPENDENT DIRECTOR DISGORGEMENT OF PROFITS OF OFFICE OF NON-EXECUTIVE DIRECTORS CORPORATE GOVERNANCE RATINGS MEDIA SCRUTINY IMPLEMENTATION END NOTE

OTHER RECOMMENDATIONS 28- DCA’s office 29- Miscellaneous - Random scrutiny of audited s - Internal code of ethics - Research on corporate governance 30- Audit firms

RECOMMENDATIONS TRAINING OF DIRECTORS 9- Need based training programmes/seminars/workshops to acquaint the directors with the emerging developments/ challenges facing the banking sector, 10- Separate the office of chairman and managing director, 11- Sufficiently long tenures of whole time directors, 12- Undertaking from every director for discharging their responsibilities to the best of their abilities.

RECOMMENDATIONS REMUNERATION TO DIRECTORS 13- Existing level of remuneration is inadequate, should be increased and may include stock-options, PROHIBITION- SEC. 20 OF B.R ACT, 1949 14- Prohibition (Sec.20 of BR Act) on lending to companies in which a director is interested, should go away.

RECOMMENDATIONS INFORMATION FLOW TO/FROM THE BOARD 15- Reviews dealing with various performance areas to be put up to the Supervisory Committee of the Board and a summary of each review to the Board for scrutiny & action, 16- Minutes to be recorded in uniform & formalised manner. COMPANY SECRETARY 17- Qualified Company Secretary to be appointed in all banks, and should also have a Compliance Officer reporting to the Secretary

RECOMMENDATIONS COMMITTEES OF THE BOARD 18- a) Supervisory Committee b) Audit Committee c) Nomination Committee d) Shareholder’s Redressal Committee e) Risk Management Committee DISCLOSURES AND TRANSPARENCY 19- a) Progress made in putting in place a progressive risk management system, b) Exposure to related entities c) Conformity with Corporate Governance standard

RECOMMENDATIONS REVIEW OF IMPLEMENTATION 20- Banks to evolve a strategy for implementation of the recommended standard of Corporate Governance. Reviews after 12 months or 6 months as deemed appropriate.